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Protecting yourself against serial skippers

Many apartment communities face the challenge of residents who skip out on leases before they’re fulfilled. And every resident who skips out on a lease leaves an unexpected vacancy in his or her wake. Residents skip out on leases for many different reasons. Sometimes they’re the victims of an unfortunate circumstance (e.g., an unexpected job loss), but for some renters, it’s intentional — and they’ve made a habit of doing it wherever they go. Residents who consistently leave behind unfulfilled lease terms to bolt for the next community are known as “serial skippers.” Serial skippers are obviously bad for a multifamily community. They not only harm communities financially, but also require operators to spend money to turn unexpectedly vacant units. But fortunately, rental screening technology has come a long way over the years, and there are effective ways to identify whether a prospective resident is likely to be a serial skipper.  The best way to protect against serial skippers is to reject their lease applications from the start. But that’s easier said than done, because it can take months before rental collections are reported to the credit bureaus. To catch them before they strike again, operators need to know the limitations of certain screening methods and the opportunities available through newer screening methods. Limitations of credit reports and scoresChecking credit reports and scores is a routine part of any community’s resident screening process. Generally speaking, credit reports and scores provide a very good indication of how consistently an applicant pays his or her bills. But......
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Tips for selecting the right screening provider

Selecting a company to help screen prospects is one of the most important decisions apartment operators make. Simply put, it’s a decision they have to get right.   High-quality residents — those who always pay their rent on time and in full and are respectful of their neighbors — are the lifeblood of successful communities. When residents don’t fulfill the financial obligations of their leases, a community’s revenue is compromised, budgets are derailed and investor returns are diminished.    Bottom line: Apartment managers need top-notch screening providers to sign top-notch residents. So what should operators look for in a screener? Here are some tips.   Make sure the screener covers the basics. It’s imperative that your screening provider examine an applicant’s credit history and conduct criminal background and eviction history checks. Obviously, problems in any of these areas would raise major red flags.   Make sure the screener is on the lookout for fraudulent applications. In this day and age of hackers and identity theft, operators need to be sure their applicants are who they say they are. When interviewing potential screening providers, insist that they have technologies in place to verify consumer identities and spot fraudulent applications and identity theft. It would also be beneficial if the screeners havea means of identifying any aliases applicants may have used over the course of their lives.   Make sure the screener incorporates rental payment history. A high credit score doesn’t always mean a resident is likely to pay rent on time and in full, and a lower score doe......
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Preventing and Stopping Resident Fraud 101

It’s a sad fact of life in the multifamily industry.   From time to time, prospects will submit fraudulent lease applications to try to secure apartments they wouldn’t be able to get by being honest. From providing counterfeit pay stubs to filling out leasing applications with fake names and Social Security numbers, applicants use many different methods to scam the system.    Perhaps the applicant doesn’t make enough money to qualify for a lease, or maybe their rental history is marked by evictions that would be a deal breaker. Maybe the applicant has stolen someone’s identity and is using that information to apply for a lease.   These certainly are sobering scenarios to contemplate, but apartment operators everywhere must look out for fraudulent lease applications. If they succeed, these scammers can create misery for operators by not consistently paying their rent, skipping out on their leases, using their units for criminal activities like dealing drugs, or destroying property.   Fortunately, operators are far from defenseless in the face of such activity. Below are some suggestions for maximizing your community’s chances of catching a fraudulent applicant.   Be skeptical and verify Leasing teams obviously shouldn’t be hostile to applicants. But they also shouldn’t take prospects’ statements and applications at face value or assume they have good instincts about prospects’ truthfulness. Leasing teams should be fully committed to thoroughly vetting applicants and independently confirming the information prospects provide. Adopt a mindset of “verify, verify, verify.”   Operators and their screening providers should pull credit reports and re......
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Five Reasons Manual Rental Payment History Checks Don't Work

The multifamily market didn't exactly crater in 2017. In fact, according to preliminary numbers from Marcus & Millichap, a commercial real estate brokerage and research firm, the average effective apartment rent in the U.S. grew by 4.5 percent last year, to $1,343 per month.  Still, there's no denying that apartment markets in many metros across the country have softened in recent years, and operators must always be on the lookout for a true downturn. What goes up must come down. When the pressure to fill their units ratchets up, operators must make sure their screening process is in first-class shape so they have a crystal-clear view of the risk an applicant poses and they can move quickly to sign suitable prospects. To do this, operators need to eliminate manual rental payment history checks and incorporate payment history that is gathered electronically and automatically. Below are five ways manually checking payment history by phone puts operators at a disadvantage in markets both soft and strong: 1. They're impracticalFor applicants with significant rental history, it can be virtually impossible for leasing agents to reach someone at every community an applicant has previously rented to check payment history.   2. They can be incompleteApplicants may not list all the apartment communities they’ve ever rented from, because they either simply forgot about a community or intentionally left a place out after a bad experience. This leads to operators having an incomplete picture of a prospect's past.  3. They don't workAt a session at the 2017 NMHC O......
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Tips for helping residents prevent ID theft

The economy is strong and consumer confidence is up, meaning people are spending more than ever before. Unfortunately, all those transactions could put them at a heightened risk of identity theft. Identity theft is on the rise. In 2016, 15.4 million U.S. consumers experienced some form of identity fraud, up from 13.1 million in 2015 and 11.6 million in 2011, according to a Javelin Strategy & Research report. As identify theft rises, apartment operators can help residents mitigate their risk of identity theft. Here are some tips: Host a shredding eventOrganize a shredding party in the leasing office or somewhere onsite to give residents a chance to shred documents containing sensitive personal information for free. Such documents may include packing slips and invoices related to online gift purchases as well as credit card statements, utility bills and ATM receipts. Residents should always shred anything that contains their name, address, phone number, Social Security number or bank account information before they dispose of them. Identity thieves have been known to go “dumpster diving” to get sensitive information out of people’s trash. A shredding party can be a great way to mix and mingle with residents in a relaxed setting while offering them an invaluable service. Provide refreshments, play games and enjoy a bit of camaraderie. Urge residents to shop only on secure websitesRemind residents to make sure that HTTPS — instead of just HTTP — appears in the URL of websites they are visiting. This shows the site is secure. Web browsers also typi......
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Amenities That Keep on Giving

In the battle to attract new residents and keep current ones in the fold, your apartment community's amenities undoubtedly play a vital role.  Today's renters – especially millennials and members of Generation Z – want more than a roof over their heads and a fair monthly rate. They want the kinds of amenities that have a long-lasting impact on their lives, the amenities that improve their physical well-being, allow them to connect with others and even help develop strong financial foundations. Strong Financial FoundationA strong financial foundation starts with credit history. A healthy credit history is valuable when buying a house, leasing an apartment home, purchasing a car and even setting up utilities. The more positive your credit history, the better financial terms you’ll receive.  Millennials, who make up the vast majority of today’s renters, are beginning to form families, which means they’re purchasing cars, homes and other large consumer goods in greater numbers. According to a recent Wall Street Journal article, home ownership has reached its highest levels since 2014 at 63.9 percent due in large part to millennial purchases. Millennials now know they need strong credit histories to eventually buy a home. Yet, most of them aren’t receiving any credit history benefits for making their largest monthly payment – rent – on time. Those who are receiving credit history for rental payments because they live at an innovative apartment community are reaping long-lasting benefits. An Experian RentBureau study of the effect of positive rent reporting on nearly 20,000 subsidized housing residen......
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Five Ways to Encourage Residents to Pay Their Rent On Time

Making sure residents pay their rent on time and in full: it's possibly the most important task facing an apartment operator. Without the expected cash flow from renters, operating expenses become tough to cover and a community's bottom line takes a pounding. So how can operators encourage their residents to fulfill the terms of their leases? Below are five suggestions. Report rental payment historyWhen operators report their residents' positive rental payment history to the credit bureaus, they help those residents build their credit history. A strong, positive credit history makes it easier for them to secure car loans, credit cards and mortgages – and to do so at favorable interest rates. When residents understand how they can create a better financial future by paying their rent on time, they will be highly motivated to do so. A couple of studies have demonstrated the significant impact of reporting positive rental payment history. In 2013 and 2014, the Credit Builders Alliance conducted a pilot project in which eight affordable-housing providers reported the rental payment history of more than 1,250 low-income residents. Nearly 80 percent of the residents saw their credit scores increase, with an average rise of 23 points. Similarly, an Experian RentBureau study on the effect of positive rent reporting in nearly 20,000 subsidized housing residents revealed a considerable beneficial impact on the thickness of the renters' credit files. According to the study, 23 percent of thin-file residents moved to the thick-file category after their positive payment history was reported. Bottom line: r......
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The unfair credit imbalance between homeowners and renters

When millions of homeowners make their mortgage payments on time and in full each month, they’re doing more than just fulfilling their contractual obligations. They’re creating a better financial future for themselves by building their credit history. A strong, positive credit history makes it easier to obtain car loans, credit cards and mortgages — and to do so at favorable interest rates. A person’s history of paying certain bills, such as a mortgage, is the largest component of his or her VantageScore® 3.0*, accounting for 40 percent of the final number. In the end, the equation is a simple one. If you miss a mortgage payment entirely or send it in late, your credit history can be hit with a late payment. If you pay on time and in full every month, you build credit history. However, the majority of apartment residents who pay their rent on time every month aren’t able to enjoy the same impact to their credit history, because many apartment companies don’t report payment history to credit bureaus. Although prior to the launch of Experian’s RentBureau® in 2011, apartment companies weren’t able to do so. While a growing number of apartment companies are now reporting rent, some have yet to consider it. But they should — for a number of reasons. Apartment rents are sizable financial commitments. The average U.S. apartment rent was $1,302, according to RealPage data released on April 3. Why shouldn’t people meeting that kind of financial obligation every month build their credit history through these payment......
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Credit education efforts taking hold at apartment communities

There’s no sugarcoating it: Obtaining credit with a low credit score or an insufficient credit history can be tough. A low score can hamstring people’s ability to obtain a mortgage, car loan or credit card — and subject them to higher interest rates and large security deposits for utility services and rental homes. But a low credit score doesn’t have to last forever. Financial education has proven to be a powerful boon to people’s credit history. Across the nation, apartment communities — especially those in the affordable housing sector — are providing financial literacy programs to give their residents a brighter future.  Communities offering these programs have found that simply offering classes is often not enough to persuade residents to participate. It’s only when the communities give residents the option to have their rental payment history reported to credit bureaus that interest in the financial literacy programs usually takes off. For example, officials with the New Hampshire-based Affordable Housing, Education and Development Inc. (AHEAD), which owns and manages more than 400 affordable housing units, report that resident participation in the organization’s financial education classes was miniscule for a decade before AHEAD began offering to report rental history to credit bureaus. Once residents learned that they could build their credit history by having their rental payment history reported, their interest in working to improve their financial standing overall spiked. “We had been asking people to come to classes with our advisors, and they just wouldn’t come,” said Matthew Manning, director of the Homeownership Center fo......
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Knowledge is power with credit and rental payment history

Charlie thought he’d found the perfect apartment community in a booming Denver neighborhood. It was located near a popular jogging and biking trail, and the twenty-something fitness enthusiast envisioned lots of long, health-boosting runs in the Colorado sunshine. But a low credit score and poor rental payment history unraveled his rental application. Spending his young adulthood being a little too careless about paying his bills and rent put his chosen lifestyle in jeopardy. Credit scores can have an impact on many aspects of life. But a large number of apartment residents aren’t aware of how a low credit score or an insufficient credit history can hamper their ability to make significant purchases. A good credit history is a major factor in securing mortgages, credit cards, auto loans and, yes, apartment homes. With low vacancy rates across much of the nation, apartment communities — especially higher-end properties — are requiring stronger credit history and higher credit scores to lease an apartment. And with more and more multifamily communities reporting their residents’ rental payment history to credit bureaus, leasing teams now have an additional method of determining which prospects are most likely to pay their rent on time and in full each month. Put bluntly, a less-than-stellar credit score and a spotty payment history means applicants might be less likely to land their desired home in today’s marketplace. But poor credit scores do more than harm the apartment residents themselves. It’s well-documented that the lower a renter’s credit score, the less likely he or she is to pa......
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